Violeta R. Lalican v. Insular Life Assurance Co. Ltd.

Facts: Eulogio Lalican applied for an insurance policy with the Insular Life amounting to Php 1,500,000.Under the terms of the policy, Eulogio was to pay the premiums on a quarterly basis, having a graceperiod of 31 days, for the payment of each premium subsequent to the first. If any premium was notpaid on or before the due date, the policy would be in default and if the premium remained unpaid untilthe end of the grace period, the policy would automatically lapse and become void. Eulogio paid the premiums due on the first two succeeding payment dates but failed to paysubsequent premiums even after the lapse of the grace period thereby rendering the policy void. Hesubmitted an application for reinstatement of policy through Josephine Malaluan, an agent of InsularLife, together with the payment of the unpaid premiums. However, the Insular Life notified him that hisapplication could not be processed because he failed to pay the overdue interest of the unpaidpremiums. On Sept. 17, 1998, Eulogio submitted to Malaluans house a second application forreinstatement including the payment for the overdue interest as well as for the premiums due for Apriland July of that year, which was received by Malaluans husband on her behalf and was thereby issued areceipt for the amount Eulogio deposited. However, on that same day, Eulogio died of cardio-respiratoryarrest secondary to electrocution.Violeta, Eulogios widow filed with the Insular Life a claim for payment of the full proceeds of the policy but the latter informed her that the claim could not be granted since at the time of Eulogiosdeath, his policy has already lapsed and he failed to reinstate the same. Violeta requested areconsideration of her claim but the same was also rejected. Therefore, she filed a complaint for deathclaim benefits with the RTC alleging the unfair claim settlement practice of Insular Life and its deliberatefailure to act with reasonable promptness on her insurance claim. The trial court rendered a decision infavour of Insular Life and after the former denied her motion for reconsideration, she directly elevatedher case to the Supreme Court via the petition for review on Certiorari.Issue:Whether or not the policy of Eulogio was reinstated before his death.Ruling:To reinstate a policy means to restore the same to preium-paying status after it has beenpermitted to lapse. Both the policy contract and application for reinstatement provide for specificconditions for the reinstatement of a lapsed policy.According to the Application for Reinstatement, the policy would only be considered reinstatedupon the approval of the application by Insular Life during the applicants lifetime and good health